Callaway 2013 Annual Report Download - page 51

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37
The $36.0 million (17%) decrease in net sales of irons to $170.8 million for the year ended December 31, 2012 was
primarily attributable to declines in average selling prices and sales volume. The decline in average selling prices was
primarily due to an unfavorable shift in product mix from sales of higher priced RAZR X models in the prior year to sales
of more moderately priced irons products during 2012. The Company’s average selling prices were also negatively
impacted by increased promotional activity during 2012 compared to the prior year. The decline in sales volume was
primarily due to declines in market share resulting from less favorable consumer acceptance of the irons models launched
in the current year compared to the strong performance of RAZR X launched in 2011.
The $5.2 million (6%) increase in net sales of putters to $93.3 million for the year ended December 31, 2012 was
primarily due to an increase in sales volume partially offset by a decline in average selling prices. The increase in sales
volume was due to the current year launch of the Metal X platform of putters. The decline in average selling prices was
largely attributable to increased closeout activity in preparation for the Metal X platform launch.
The $9.8 million (4%) increase in net sales of accessories and other products to $229.8 million for the year ended
December 31, 2012 was primarily driven by an increase in sales of: (i) packaged sets due to the launch of the new Callaway
Jr. sets and Top-Flite packaged sets; (ii) apparel primarily due to the sale of golf apparel in Europe and South Pacific
beginning in the third quarter of 2011; (iii) GPS devices due to the 2012 launch of the Company’s new MX+ GPS device;
and (iv) an increase in sales of golf bags. These increases were partially offset by a decline in sales of footwear and
headwear in 2012 compared to the prior year.
Golf Balls Segment
Net sales information for the golf balls segment is summarized as follows (dollars in millions):
Years Ended
December 31, Decline
2012 2011 Dollars Percent
Net sales:
Golf balls.............................................................................................. $ 139.6 $ 160.4 $ (20.8) (13)%
The $20.8 million (13%) decrease in net sales of golf balls to $139.6 million for the year ended December 31, 2012
was primarily due to a decrease in sales volume partially offset by an increase in average selling prices. The decrease in
sales volume was primarily due to a decline in sales of Top-Flite balls primarily resulting from the sale of the Top-Flite
brand in March 2012. In recent years, sales of Top-Flite and Ben Hogan branded golf balls have represented approximately
25% of the Company’s total golf ball annual sales. The increase in average selling prices was due to a favorable shift in
sales mix from lower priced Top-Flite balls to higher priced Callaway golf balls combined with the successful current
year launch of the HX Chrome and HX Black Tour balls.
Segment Profitability
Profitability by operating segment is summarized as follows (dollars in millions):
Years Ended
December 31, Growth/(Decline)
2012 2011 Dollars Percent
Loss before income taxes:
Golf clubs(1)........................................................................................ $(59.8)$ (3.9)$
(55.9) (1433)%
Golf balls(1)......................................................................................... (15.0)(12.7)(2.3) (18)%
Reconciling items(2) ........................................................................... (43.2)(73.7) 30.5 41 %
$(118.0)$
(90.3)$
(27.7) (31)%
(1) Included in the Company’s golf clubs and golf balls segments are the following pre-tax charges:
• $30.4 million and $16.6 million, respectively, for the year ended December 31, 2012, in connection with the
Company’s Cost Reduction Initiatives announced in July 2012;